Evercore’s Roger Altman & The Prospects For M&A

Evercore’s Roger Altman appeared on Bloomberg Television’s ‘Surveillance Midday’ with Tom Keene today to discuss the current M&A landscape as well as the U.S. strategy in Libya.

Altman says that the M&A cycle will not be derailed in 1-2 years and that Libya should not be a U.S.-only effort.

On the U.S. economic recovery vs what’s happening in Europe:

‘History will show that the United States reacted forcefully, powerfully, and effectively to the credit market collapse and the great recession, and that Europe reacted less forcefully, less effectively, and so forth. That is what the verdict of history will be. However, we are also, in this country, resisting at this very moment a degree of austerity with which we will need to embrace here. If you look at the latest CBO revision on the long-term deficit outlook, it is not tenable. It is not a sustainable thing.

We want to actually get from here to the point in 2021 when the CBO says we have federal debt representing 100% of our GDP. That is levels like Italy and Greece. We won’t actually to get from here to there. Either we will solve this proactively, our leaders getting together and negotiating an outcome, which I hope they will. Or the global financial markets at some point over the next three or four years will intervene and impose a solution for us. One way or the other, the austerity is coming here also’.

On if this should be addressed after the election in 2012:

‘If you were a betting person, you would probably say that. I would like to think we would at least put in place a framework along the basics of the Bowles-Simpson commission report, which would then perhaps be implemented later. If you were a better, you say that we will probably not address this directly until then’.

On the current M&A environment:

‘The bottom obviously from an equity point of view was March 2009. I think that history will show that that was also about the bottom on merger volume. So, we are about two years into this M&A recovery, and it probably has another three years to go, give or take. What is really going on now is a virtuous circle, if I could put it that way, or cycle, which always spells higher M&A volume. You have rising equity prices. You have extraordinarily favorable credit market conditions and financing ability. You have improving business conditions. Those together spell higher CEO confidence, and that’s the combination that has historically meant growing merger volume and that’s why we’re seeing it’.

On what Evercore is seeing in the U.S. economic recovery:

‘We are seeing some improvement in the labor market conditions now, but it is slow and pretty anemic. This is the greatest challenge of our country faces other than perhaps our fiscal overhang to revive our labor markets. While I do think we will see improved monthly job numbers as the year goes on, it’s going to take us five years to get the 8.5 million people that were employed four years ago that are not employed now back into the workforce. The longer that takes, the harder it will be because so many of the unemployed are now long-term unemployed. This is a terrible problem and I do not think we at as a nation are doing everything we can on it’.

On a public policy to assist private market development on job creation abroad:

‘The key to improving our labor markets over the long term is education. It sounds trite, but it is. The college completion rate in the United States has been flat for quite a few years now. That is not the case in a lot of other advanced countries. It is about 62%. We must get that up. If you study the returns-to-education, income by education level, you see that the importance of higher education has never been greater in terms of employment. We are living in a world which is not only globalized, but intensely skill dependent. As a country, we are not doing what we have to do on education. We’re never going to get where we really want to be on raising standards of living unless we improve education levels’.

On Bill Gross’ assumption on higher bond yields and the effect on the M&A boom:

‘I don’t think there is going to be any derailing of the merger dynamics I discussed over the next year or two because yields will probably rise but slowly. I agree with his forecast in terms of eventually being higher and probably quite a bit higher. But I think that will be slow given the slack around the world, economically speaking–the U.S., Europe, Japan in particular–so, no, I do not think it will be derailed. Whether his take on that is right from a bond market point of view, I think it is’.

On the leadership in the White House:

‘I do not buy the idea that the President is not leading when it comes to Libya. The United States does not have, at least in my view, strategic interests in Libya. If you think about the countries where we do, Libya does not fit into that category. Therefore, to have this no-fly zone and what follows from this, not be an only U.S.-only approach, is the only way to do this. It is the right way to do this…I think Obama has been correct. This shouldn’t be a U.S.-only effort…Particularly when you consider how limited the resources of the U.S. are in terms of both a military point view and a financial point of view, we do not want to be enmeshed in Libya’.

On the AT&T and T-Mobile merger:

‘This is as fiercely competitive a business — wireless — as any you know or I know. Just watch, for example, the NCAA March Madness. Every other ad is for an ad for a wireless service. This business is going to remain fiercely competitive, and this step will not change that. By the way, prices have fallen 50% over the last 10 years, and they will keep falling whether this occurs or does not occur. I do not see this as changing the fundamentally fiercely competitive nature of the business nor the price in curve going down’.

Source – Bloomberg TV

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